Why is this usage varaince adverse?

topcat

20131008_192534 by AdamSWilkinson, on Flickr


20131008_192556 by AdamSWilkinson, on Flickr

I am stuck on why the answer is £30 Adverse ? When the actual material usage cost was lower than the standard usage cost would be?

These are my workings

AQ X SP
5500 X 0.2 = £1100

SQ X SP
5650 X 0.2 = £1130

Therefore £30 F?

any help appreciated as always please

coojee

topcat wrote: »

20131008_192534 by AdamSWilkinson, on Flickr


20131008_192556 by AdamSWilkinson, on Flickr

I am stuck on why the answer is £30 Adverse ? When the actual material usage cost was lower than the standard usage cost would be?

These are my workings

AQ X SP
5500 X 0.2 = £1100

SQ X SP
5650 X 0.2 = £1130

Therefore £30 F?

any help appreciated as always please

They used 5650 bottles to make 5500 bottles so there was some wastage of bottles ie an adverse variance of 150 bottles. The standard price of a bottle is 20p so 150 bottles x 20p = £30 adverse

Using the nps method:

AQ x SP: AQ is 5650 (ie the number of bottles used, not the number produced) x 20p = £1130
SQ x SP: SQ is 5500 (ie to produce 5500 bottles we should have used 5500) x 20p = £1100

to gives £30 adverse. You've just got the AQ and the SQ the wrong way around

Nps

I assume it's the bottles we're looking at? You've just got them the wrong way round.

AQ X SP = 1130 (5650 x 0.2)
SQ x SP = 1100 (1100 from the flexed budget)

Which gives you the £30Adv

The Actual quantity is the number of bottles used, not the number of units produced. The Standard Quantity is the number of bottles expected to be used for the 5500 units as per the flexed budget.

Nps

Snap!

topcat

Of course what a daft thing to do! thank you both for pointing that out :thumbup1: